Textile Production Is Moving. Who Really Makes America’s Clothes? | Robert Antoshak

There is an effort to move manufacturing out of China and near-shoring is becoming a thing. But is this real? And when we buy something made in Mexico, is it really made in Mexico or is it still gonna be made in China, 70% of it? Today we sit down with Robert Antoshak, who's a veteran in the textile industry. He will tell us how things are done behind the scenes. He will also give us an insider view into the fashion industry and how it works. What ended up happening was China built not only a very good apparel sector, but they built this huge, massive fiber and textile industry, just enormous. Biggest in the world. When the tariffs hit, the textile companies started shifting and they started investing elsewhere, in places like Vietnam, and elsewhere also in places even closer to the US, like in Central America and Mexico, import a lot of Chinese. Even Mexico is importing. So what we are buying is still Chinese. It's still Chinese, and actually it isn't a question of shipping from China to Vietnam. It's actually a Vietnamese company that just happens to have Chinese ownership. Do you think we can bring this industry back? Do I see it coming back? Yes. Will it be like the old industry? No. I'm Siamak. Welcome to Market Insider. Robert, it's great to have you on. Welcome. Thank you so much. It's a real pleasure. We wanna talk to you about manufacturing and textile industry. This is a big issue. A lot of it had gone to China. Now we are buying things made in Vietnam. What's happening? Is it really made in Vietnam? Is it made in China? What are you seeing out there? Well, it's interesting. Since a lot of the new tariff regimes have been put in place, a lot of the trade has shifted. A lot of it was aimed to control China, because China was the go-to source for textiles and apparel. So if you were a retailer or a brand in the US and you were gonna source consistently from one country or one region, China was always the choice. Best balance of quality and price. And they really had a system down. It got disrupted during COVID. So it showed early on, the industry had a sense of what would happen if China was locked out for reasons that obviously were out of everyone's control. But as this new tariff regime came in, there was a concerted effort to control China and in our industry to limit how much people could economically purchase from China directly. And what that has done over time is, yes, aggregate imports have come down from China, but what it's really done is it's shifted. China has an enormous textile infrastructure. So I'll make a distinction. Fibers are the things like cotton you grow or you make in a test tube if it's a synthetic, right? Then they make it into yarn. So they basically come up with filaments and they wrap it together and they come up with the yarn. From a yarn, it goes into a fabric. So it can go into like a woven fabric or it could go into like a knit, like my socks, okay? And the finished garments then in turn are sold to the consumers, right? Well, what ended up happening was China built not only a very good apparel sector, but they built this huge, massive fiber and textile industry, just enormous, biggest in the world by far. So as these tariffs got put on, the textile companies started shifting and they started investing elsewhere in places like Vietnam. It had started actually prior to the new tariff regime, but it had- They started- This was after the pandemic? After the pandemic, they had started to shift because people were realizing- People got wary of China and- Yeah, they got wary. So there was some movement that was going on. China also, their costs were beginning to go up. Labor costs were going up. There was more competition for manual labor, different industries competing for that. So there was some indication of that early. When the tariffs hit, it just accelerated it even more. So what we're finding is a lot of the Chinese yarn and cotton, synthetic fibers and textiles, meaning fabrics, are being exported through Southeast Asia, also in South Asia, and elsewhere, also in places even closer to the U.S., like in Central America and Mexico, import a lot of Chinese. So even Mexico is importing. So what we are buying is still Chinese. It's still Chinese, and there's efforts underway to try to understand how that can be controlled from the perspective of, not because it's China, but because there's legislation in place to restrict the consumption of product made in the Xinjiang province. Because of forced labor. Because of forced labor, the Uyghur Forced Labor Act. So to enforce that, it goes right into the raw material. So the U.S. government has its work cut out for itself to be able to figure that out. How do you trace it? So there's a lot of effort being placed now on how do you trace it. But the long and short of it is, yeah, there's less direct imports from China today because of that, but a lot of the inputs, meaning the fabrics and so on, are being shipped to third countries, and then being made into apparel, and then shipped to the states, or to Europe, or wherever. And that is gonna be the challenge. So when we are seeing these things that are made in Vietnam, it's probably, is it 30% made in Vietnam, and 70% made in China, or is it 20% made in Vietnam? Well, it's where the cutting is, where they do the assembly work. So where they take the raw fabric, and where they cut it into panels, and then sew it together, and make a garment out of it. That determines where the country of origin is. Okay, so it'll come in legally from, say, Vietnam. But the trick for the forced labor restriction, it's law in the U.S. that you can't use anything from that region in China. The trick is determining if the yarn, or the cotton that's in it, in particular, comes from Western China. So there's a whole industry that's been built up to do this forensic analysis, where they do this DNA testing. It's kind of a fascinating thing. And where they can actually tell what region something was grown in. That's how they're tracking it. The problem is, it's a manpower issue for U.S. Customs. So it's a challenge. So they have to test the whole world, essentially, from what you're saying. Pretty much, pretty much. And that's a problem, it's a practical problem. And so right now, they're still wrestling with how to do that. But they've made the pronouncements. And, you know, I think everyone's waiting and seeing what enforcement looks like. You know, there's always gonna be people who try to circumvent the system. But more people than not, we're gonna be honest about it. And they'll explain where every bit of input comes from. And then they document it, because they don't wanna get in trouble. They don't wanna have to deal with seized shipments and so on. So, particularly a smaller company. What about the tariffs? So when Vietnam is buying the raw material from China, they are not, the tariffs is gone, right? In a sense, China is bypassing the tariffs by just selling the starting material. Is that how it works? Yeah, but also that's why, at the end of the day, it depends on the country, right? So if Vietnam has a better tariff rate than, say, China does directly, that works. If for some reason it doesn't, or say, I don't know if there is, if anybody is as high as China these days, it has changed a lot. And sometimes it can change seemingly day to day, week to week, which I think is part of the strategy, you know, is to discourage the importation of product. I think the industry is at a point where it's like, it'll adapt to almost anything, as far as the costs go. Doesn't mean they're gonna be, their margins are gonna be great, but they're gonna be, they try to adapt. So yes, at the end of the day, if you're importing from Vietnam, that is a way of lessening the blow on Chinese manufacturers. Many of these manufacturers, however, had started investing in production and in opening mills in Vietnam before the tariffs. So this goes, again, it was all part of this, once COVID showed weaknesses in the supply chain, that supply chain worked great until it didn't. And then we all remember what happened. It was just the economic, it was a bust, then a boom, and nobody could keep up. Everything was whack, right? I mean, the deliveries were all out of sequence. There was stuff that couldn't get sold. There was this real mess for folks. So that hastened the movement of Chinese investment out of the country to other countries. And because of that, because again, I think they saw that things directly sourcing out of China was gonna be limited over time. And it was really accelerating. So a lot of them got ahead of it. And actually, it isn't a question of shipping from China to Vietnam. It's actually a Vietnamese company that just happens to have Chinese ownership. Now, Robert, you brought up the cost. Did the tariffs add much to the cost? Because when I look at the numbers, as somebody that doesn't know your industry, I will say, okay, the buyer, the seller in China or other countries is only like selling at a fraction. And what's the 20, 30% added to that? It's not a lot at the end of it. Or is it, did it make a huge difference? Well, when it first hit, I remember there was a lot of, you know, there was widespread panic. You know, all of a sudden it went from 10% or 12% to 40%, you know, and everybody has to adjust. That was a problem. And typically that continues to be a problem. Every time there's a shift in the tariff regime, that becomes a problem for our industry. I mean, they're good at shifting, but that's pretty tough. So however, if it stays in place for a period of time, the supply chain has enough time to catch up to it. And basically all the players in the chain absorb it, absorb a bit of it. So a supplier will pick up part, the buyer may pick up part, the intermediaries may pick up part. It just depends on the product. And at the end of the day, it kind of gets diluted and going for the longest time, apparel inflation in the United States was running way below top line inflation. Okay, way below. That has shifted in the last few months. So now apparel inflation. So basically some of it's getting into the system now. But it took quite a while because there were, the supply chain knew that price sensitivity is a thing and they had to really know how to compete effectively in the long run. So they were reluctant to just pass the costs on. And even if the ultimate consumer or the retailer, say buying from a wholesaler would absorb those costs or would pass on those costs, they were reluctant to, not in this environment, or actually any economic environment over the last 15 years. It's really hard to pass those kind of, you know, cheap is important. You know, and so it's not that easy to pass it on. So the supply chain ended up having to eat it in different ways. And it's only now we're seeing some price inflation. And what about the Mexico and near shoring side of things? So there is a thought that things will come closer. It's cheaper to ship, but is the labor, we've talked to some experts, they've told us that labor is getting on par in even in Mexico. It's interesting, when you do straight up cost to cost, they can't compete. Mexico can't compete. No, can't compete. Just on pure cost, when you look at it, just on the manifest, okay? But that's not taking into account the proximity to the market, speed to market. Shipping and the time. Shipping and all, basically instead of being a six month order, it could be a six week order. And what's the value to the buyer to have that flexibility? How do you put a number on that? And a lot of sourcing companies don't even, like it hurts their heads. They don't even wanna even talk about that. But the ones who understand the overall cost structure and they make an assessment based on the entire package and also they put a value on speed to market. They're the ones who are doing it. And they're the ones who are being very successful at it. And there's some real big players that have been doing that very successfully for a number of years. And even in very low margin product too, it doesn't have to be in suits or in jackets or dresses. It can be just in basics, underwear, T-shirts, things like that. So it's been, only if people understand that there's a net financial benefit for speed to market, it doesn't make sense. Then it is cheaper, okay, to source from there. You brought up margins and it's a mystery for a lot of us because I've talked to some manufacturers. I ran into them, believe it or not, on a plane in China that they told me that a shirt, it will cost them maybe, they will sell it at $5 to a brand that sells it for 100. Yeah, that's right. Can you tell us about that? How does it work? Well, again, a lot of people look at that margin and they say, oh my gosh, they're making that kind of a return. Well, that's the assumption if the shirt is purchased. So what ends up happening is, and this is a big problem in the industry, sourcing people have to guess how much product will sell and they never know, they never can really know, all right, unless it's a very specialized market and they have a tight lid on it. But if you're a large purchaser of product, you wanna make sure you always have product on the shelves plus extra just in case. So what happens is that that margin really only applies to what's sold, okay? At the end of the day, a lot of it is not sold. What happens to it? Sometimes it's destroyed, it gets burned. Sometimes it gets- Even gets destroyed. Gets destroyed, you know, so there's like this huge waste problem in our industry and there's an environmental impact as a consequence. All this unused clothing, let alone trying to recycle used clothing. It's a real problem, right? So, but at the end of the day, the retail structure is such that when you, it looks like a lot, but even on the shirt that sells, let's say, there's still, there are additional costs at retail that have to get absorbed and they're substantial. So there's the cost of the retailer and- The cost of the retailer and the stocking, you know, I mean, keeping it on the shelves, having easy access to it. You know, there are additional costs that come into the chain. So it's not a fictitious number. I mean, again, it's easy to look at it and go, wow. You know, a $5 shirt going for a hundred bucks, you know, yeah, that happens all the time, right? But, you know, at the end of the day, there are real costs associated. So we were paying a hundred, we were paying for five shares, that four of them may not make it. Exactly. So I would say, buy wholesale. And now in terms of this coming back, and you have been part of this industry for many decades. Tell us about that. And then do you think it's gonna come back here? Well, let me explain a little bit about my background at first. So way back when I was right out of college, my dad helped me get a summer job in the fiber industry. And at the time, the US had one of the largest fiber industries in the world at the time. So I got my feet wet and all that. So I learned on the go about fibers. And once you're at that level, cause that's kind of like a big picture looking down on the supply chain, then textiles came along and then trade came along and I moved to Washington and I was working on trade matters for the US textile industry. And then from there, I worked in the cotton industry for a lot of years. And these days I've worked in the garment business, garment industry, I've worked at retail and I'm consulting now because my experience is the whole supply chain. Okay, that's 40 some odd years. Okay. I used to have hair way back when and used to be a different colors. Yeah, okay, there you go. So, you know, it's that kind of stuff. But what I've saw from that period, there was a time when the US had a dominant textile industry, a significant apparel industry, meaning sewers, a sewing industry. Here in the US, I mean, it was in the Southeast, both were in the Southeast. I mean, there's also, I should say, there's a lot here in LA. Okay. There's a lot in California as well. There's still some in California. But things started to change as many brands began to realize they needed more options. The market, the consumer was looking. Let's see, when I got out of college, it was 1980. Okay, everybody, I'm dating myself here. But in the 80s, there was a push to go more casual. When I first started going to work, I had to, you know- Suit and a tie. Yeah, I was like you. I had to be a suit and a tie, right? But gradually, the culture started to shift more to sportswear. A lot of it was because of high tech and, you know, dress codes were different. And then when casual Fridays came in, that was kind of a new thing. And the requirement for different types of garments started to change the business. So a lot of brands saw opportunities. So many of the brands would go to the domestic industry and say, we need this fabric, we need this kind of construction, and we need this kind of a price point. And the reaction, in many cases, was you can have any color you want, any price you want, as long as it's priced like a Model T Ford, and it's this color. Remember the old joke with Henry Ford? You can have any color Model T you want, provided it's black. Okay? To some degree, that was the case here. They basically would say, these are the styles we have right now, and that's it. They didn't want to work. We didn't want to get out of there. They didn't want to work. And they didn't feel they had to, because again, they had a pretty good lock on the market domestically. On top of that, there was this very elaborate system of import quotas that were protecting the domestic industry. And it would cover imports of yarn. It would cover imports of fabric, and it would cover garments. And it would cover home textiles, you know, like bed sheets and stuff. And it would cover soft-sided luggage. You know, the stuff you're in the airplane, the backpacks, and so on. So you were not allowed to bring more in, or you had to pay a big, big tariff? There was a limit. This is in addition to high tariffs. There was an actual physical limit that a certain country could export to the US. So if I was in China, and I wanted to send jeans to the United States, there was a quantitative cap. After that, you're out of luck. It doesn't matter if you pay the tariff or not. Right. Yeah. So the industry was very confident. It was very confident. But the importing community grew substantially, because with sportswear comes price sensitivity, a lot more than you had with tailored clothing at the time. So that price sensitivity from the consumer put pressure on the supply chain, on the retailers and brands to get creative about how they made their product at what point, and how they made it. So there was definitely an interest to diversify to meet demand. This is a classic example of consumers say, I want this, and the industry has to respond. Otherwise, there's no business being done. So many of them went the route of going first to Hong Kong. That was the first big one. And they found they could get anything they wanted. They had companies that were set up and said, oh, we'll arrange all the production for you and delivery. That was done very well. And this kind of clothing didn't meet within that, wasn't within the quota for this? It was within quota. Okay. But they had the ability, and a lot of companies, a lot of exporting companies would have to pay for quota with their own organizations or governments to get access to the quota. But so there was a whole nother, that's another topic. There was a whole, there was a stock exchange for quota, basically. That's crazy. But in reality, you could ship under that and do a very good business. Because once you had quota, you would keep it. So every year you'd have to fill it. There would be a guarantee for you. And the buyers would love it. And they would be able to diversify their sourcing, get their price points. Quality was an issue at the time. And this is before you started to get into the super hyper fashion. Okay, that hadn't quite occurred yet. Years later, that occurred. And for different reasons, we can get into that. But at the time, it was under quota. But so there was an erosion in the domestic base that started to occur, even though there were import quotas. And- And then what happened next? So what happened next was we, there were two administrations, George W. Bush as president, and then Bill Clinton's administration. Actually, it started with Ronald Reagan when he was very much into doing something in NAFTA, doing the NAFTA agreements. It kind of started there. So you had NAFTA. A lot of people blame NAFTA for a lot of the problems we have today in the economy. It was really, that actually had, that was a mutual, at least in our industry, that was a mutual kind of benefit. That was a win-win structure. It was when, under Bush in particular, it started to get, there was a school of thought that free markets, you know, the Chicago School of Economics, you know, free and open markets, unfettered trade, low tariffs, were really good at the end of the day. And I remember all the politicians, both parties would say, we can compete with anybody. Not really, because it's simple economics. Eventually, you have developed economies. They're different than developing economies. So at the time, there was a decision made to, let's liberalize global trade. Let's knock down all the trade barriers. And of course, the biggest thing, the biggest exception to trade for years coming out of the Second World War, under the old GATT arrangement, General Agreement of Tariffs and Trade, was textile quotas. It was governed under an agreement called the Multifiber Arrangement. And it had like 100, I don't know, it was 100 countries under it, but it was, a lot of countries were, and there would be these bilateral negotiations that would occur. They wanted to do away with bilateral relations on trade, and instead focus on a multilateral solution to enhancing trade, right, and a growing trade. How would you do that? Well, you need a central organization. So they said, well, let's take the GATT organization, let's call it the World Trade Organization, and let's leave it in Geneva where it was, Switzerland. That's the neutral point. So all agreements would be done multilaterally from now on. And if there was a dispute, there was a dispute mechanism that was adopted. And that dispute mechanism could work very well or it could work very slowly. Everybody, you know, I don't think it was satisfactory to everybody for sure, but that's what was there. But once that was adopted, that philosophy of open markets, and the free flow of capital encouraged all of that, the world, to borrow from Tom Friedman, the world really did get flat at that point, okay? And because the obstacles of import quotas plus high tariffs, not as high as we're seeing today, but higher tariffs, but the quantitative restraints was a real, you know, hindrance. Once, as part of the agreement to get people to sign the World Trade Organization agreement, and also they wanted to bring China in. And I think the expectation was that a little dose of capitalism will get rid of the communists. I don't know how that turned out, not too well, I don't think, not much effect or some effect, I don't know, depends how you look at it. But once China was let loose, that's what caused so much of the economic damage here. Because there was no way of controlling that anymore. There was no way of, there was no change occurring in China, the way people thought, politically and socially. And the Chinese came up with a different way of addressing how they managed their culture and society and so forth. But for the rest of the world, it let them loose economically. And to their credit, they produced high quality, inexpensive product, particularly basic manufacturing like apparel. And they could just literally dump it all over the world. And they were very successful at it. And at the same time, they put huge resources into building up their own industry. So a direct result of free trade is the China model, what happened in China. China was built because of trade. China has to have trade in order to continue to succeed economically. And now what about here? So where we are today, do you think we can bring this industry back? Is it possible for it to come back? It's very tough. And I would say, let's talk the theoretical first, and then I'll talk about an example. Theoretically, it is possible to bring back parts of the industry. Parts of the industry that were left years ago, that moved offshore years ago, there's a need for certain textile inputs in particular. Machinery driven production could be brought back. Yarn, for example, the yarn industry has been shrinking here, but yet there's demand for yarn in this region. There's something to be said for investment in that part of the industry. Will cut and sew ever come back to the way it was at scale? I have a hard time seeing that. There are wage issues. Okay, of course the wages are higher than they would be in some of these developing countries. But also there's a lack of skills. I mean, a lot of that was lost when the industry left. Generations just aged out and people weren't retrained. So when you get into doing manufacturing, it's really hard to find the quality talent to run it. You got to train them all again, which is slow. And there are companies who have done it, but they've proven that it's really slow. And you have to be really, really careful about how you do it. But on a wide scale, I'm a little skeptical. You could ever get that part of the business back like the way it used to be. Instead, I think what we're getting is this very smart pockets of cut and sew, you know, sewing in this industry for certain products and certain elements of the market. There's definitely a made in USA market. Small, but there's a consumer that only wants made in USA. Okay, you know, there are ways of handling that and they do it. But for the broader industry, I think it's more a case of high automation and new investment. The current textile industry has struggled with having the available capital to constantly reinvent, to constantly invest in the newest and latest equipment. They haven't had the financial wherewithal. It's been written off by a lot of investors as yesterday's business. You know, it's just not exciting. So the capital is not coming, a lot of capital is not coming in. And does it matter to the customer, consumer where it's made? You mentioned the made in USA, it has its customers, but is there a difference between made in Vietnam, made in China, and made in Mexico in the eyes of the customers? When you survey them, they say it all the time. Oh no, that's the most important thing. In reality, you put them in a store, they got a shirt selling for $20, you got the same shirt selling for $20 made in the USA, right next to it is a shirt from Vietnam selling for eight, wins every time. The consumer is always gonna go for the best deal, nine times out of 10. So as a consequence, the desire may be there, but are people in a position to actually afford it or wanna put the money into it? And these days with rising prices and so on, it's hard to see that succeeding on a wide scale. Okay. So the price is the number one concept. Price is the number one. Same thing with sustainability. People say they want a sustainably made garment. Yeah, there's a chunk of the market that will look for that and buy that, no question. But for the vast bulk of the market, it's price. But at the end of the day, I think where the industry has been very successful has been in bringing in the fast fashion model. The fast fashion model, and now today they call it what, super fast fashion or hyper fashion, I don't know, pick your, you know. And where you've got, literally they were doing drop shipments direct from China. And companies were able to turn around garment production in like a week, which is incredible. And obviously people were very skeptical of the working conditions of these smaller companies. But the product that was coming in, it was coming in under a loophole in the US law, something called de minimis. So de minimis means, you know, of little, of nothing, basically, right? So you go overseas, you buy some gifts, you wanna bring it home for your family. You're not gonna pay customs on that. You don't pay customs on it. So they would let you bring in, what was it, $800. Well, there were companies who figured out, several high profile companies figured out that you could do a drop shipment directly from China to a US consumer under $800 declared value and pay no duty on it. So it started as a few tens of thousands of units that were coming in, and then it went to billions. And you built huge companies that were built around this exclusion. And the same thing went for Europe, too. So you could literally circumvent all the higher tariffs that were in place elsewhere and put your retail competitors at a disadvantage. Because they were- And charge, as a manufacturer, charge those huge margins. Exactly, and they were undercutting everybody. So basically, it was like buying wholesale, in effect, because you didn't have those additional markups. And plus, how they were marketing it was with an algorithm and off of TikTok or Instagram. And a lot of the younger consumers, going back to the issues of quality and where it comes from, less concerned about where it's coming from, more concerned with the color's right and the fit's right. Well, and more than anything, the price. Yeah. Yeah. And you know what? They'd put the garment on. Often, the garment was designed to be worn twice, and then it would start to tear. No problem, because the way their model worked was the next Instagram post was going out with basically the same garment, but in a different color. Oh, it's so cheap, I'll get the next one. It gets thrown out by the consumer. And of course, that's a terrible environmental problem. Is that still going on? Is there a lot of it, or did they crack down on it? They cracked down on it. To the credit of the administration and the hard work of the US textile industry in particular, that's gone now. You can't do it anymore. And it's had real implications. And it also, ironically, made it easier for traditional retailers now that they could breathe easier, because they were not happy with it either. They were getting undercut, and not a tiny amount either. We're talking big volume. So actually, it helped everybody in that regard, whether you were a retail buyer or a brand buyer or whatever it is. Now, you mentioned the retailers. In your space, what are you seeing? Are retailers going more online, or are the traditional retailers are still doing okay? The traditional department store is an endangered species. Many people have called that. And there are exceptions, but as a general rule, the traditional department store is really under enormous price pressure. And that model is going out overall in exchange for specialty retailing, physical retailing, as well as online. So like Macy's of the world, Nordstrom, or is- It's hard, it's hard. So there's been quite a consolidation of the traditional department store, okay? So a lot of the customers left to go to big box physical stores if they needed to get discounted clothing. Department stores were selling service and environment. Consumers are more inclined to cut that out. In other words, they didn't want to pay for that anymore. So those kind of, that would talk about margins getting squeezed. That's an example. But once the margins get squeezed to a point where they can't really afford to keep the stores running and stocked properly, it's a problem. So the traditional department store is under a lot of pressure. And there have been a lot of closures. That doesn't mean the entire sector is gonna get wiped out, but it's gonna be very different. And if you go into a department store now, you'll find the assortments are quite a bit more focused than they used to be. Instead of throwing everything on the floor or in the shelves, it's more focused to items that they no sell. There's a certain demand. Everything else you can get online and they'll point you to their website. So they have less variety. Less variety, yeah. And I've noticed that, yeah. Yeah, yeah. And that's a direct result of the impact of tech, technology, and the acceptance of buying clothing online. And the willingness of consumers to say, I'm not sure of the size, but I'll buy the larger one and the medium one. And whichever one doesn't fit me, I'll return it. I'll send it back to you. Send it back. And that's a real problem too in terms of running up costs for retailers. There's quite a cost associated with that. Shipping it back and forth. They often are paying for the shipping. You know, but multiply it across, it could be thousands or who knows how many units. And where it's, very often it's just sizing. It's nothing wrong with the garment. It's just, so the product goes back, what happens after that? You know, does it get restocked? Depends. Could get put into another supply chain of discounted merchandise. Or again, in some cases, it ends up just being thrown into a landfill. And we've all seen what happens there. They typically get sold into a, basically a used clothing market that ends up in Africa, typically in West Africa. So, and the environmental impact is severe because you go there and you just see mounds of clothing everywhere. I mean, it's just, it's like, you know, the beaches are covered with it in some countries. I mean, it's really, it's a tough thing environmentally. So, but yeah, no, the consumers at the end of the day, once the generation, I remember when I was of that age, say in my 20s and I'd be like wanting to buy something, you know, at the time they started, like once the web started up a little bit, you could buy some things. I guess that's more in the 90s. Then that was kind of cool, but you were always worried about clothing. It's like you wanted to get the fit right and all this. Well, the workaround was get two sizes and ship one back. And which is very wasteful, actually. And a lot of times that may not make it back to the shelf. Correct. Yeah, it depends how the garment was treated. Was it, did something happen to it? You just never know, right? What about the quality? You mentioned that some of these manufacturers, they cut the quality, but they're cheap. Is the consumers going that direction where they want cheap and low quality, or is it? The trick has been to encourage the consumer to constantly roll their wardrobes. That's the industry push. Has been to basically, you want them constantly buying new product. So as a consequence, the only way of really doing that is the cheaper product. In other words, you don't make a $1,000 sport coat and expect people to roll that. That will last 10 years. Right. So what's happened now is it won't be $1,000, it may be $100 sport coat. It does fine for a period of time, but then they're back in the store in the next year. Okay? And that's a long-term case. But in particular with women's wear, a lot of women's wear is just poorly made. It's just really- To make sure they come back. They keep coming back. So you wear it like a couple of times, but it creates a lot of waste, right? A lot of waste. But again, the consumers also like that because it's at a price point that they can afford it. And of course, who wouldn't like a nice new blouse or a nice new shirt or a new pair of jeans or whatever it is, if the price is right. Okay? And that's sort of the mentality. So there's a push and pull there that's going on between the consumer and the industry. So, but the net result is the products have to be cheapened. Things that we're taking for granted in quality clothing manufacturing, often there are shortcuts taken intentionally to keep the cost down. Certainly the high end of the industry is just the way it's always been. But I'm talking about the rest of the, the vast majority of the business. No, it's been a cheapened product. And volume is more important. Moving SKUs is more important than anything. Going back to where the industry is going, do you think there's going to be more in Mexico and reassuring, or do you think it's going to be Vietnam and other countries, but they're really come from China? The way I see it, I'm a big proponent of the regional production. So I want to see it succeed and I want to see reassuring succeed. But I think it has to be done differently than using traditional models. And I'll give you a tangible example. There's a group in the US Southeast that is putting together textile manufacturing, but the money and the know-how is coming from Silicon Valley. They've come up with an angle, can't elaborate yet, but it's so unique that it's attracted Silicon Valley investors and talent to basically take an old, tired industry in the opinion of many, but do things in a different way, okay, in a very exciting way. But it's so out of the box for the traditional textile industry, it hasn't occurred to any of them yet. So it's very exciting. And I've been involved with that project, that's why I can't say much about it. Other than just say, they told me, they said, hey, make sure when you're on the program, just tease it a little bit. That's fine. You know, they like that. And that's fine. And it's very exciting possibilities. And maybe if I'm lucky enough to be asked back, I'll be able to tell you all about it. Yeah, you should definitely come back and tell us more about it. And so there is movement in this space. There is some movement. To use new technology with new investors to revitalize the business. Revitalize the business, because to bring the jobs back, okay, there is a distinct, and again, it could be basically in textiles I'm talking about. So it's highly mechanized. Just with the newest equipment that's available, it's really interesting what you can do now. And the price differentials compared to offshore are often you can beat them. Wow. So that's the possibility. That possibility. And of course you're in market, so you don't have to worry about tariffs and all that stuff. Having said that, I'm very bullish on Mexico. I'm bullish on Central America. But they also have to kind of look at their businesses not in the traditional way, the traditional model. Just trying to compete on price is, it's gonna be very difficult. But also, it's been very hard to tell a story that it's ultimately better and cheaper and more efficient for a buyer to import from, say, Guatemala than it is to import from Vietnam because of the geography and the basic. All the shipping. All the shipping, and also the fact is you've got duty preferences negotiated if you use regional components. There's a debate going on right now about the, what they call the yarn forward rule in the USMCA, which is the NAFTA 2.0, whatever it is now. NAFTA 2.0. And the CAFTA, Central American Free Trade Agreement, where basically if you use regional yarn in your garment, duty free. Okay. Or reduced duty. So that will help you avoid all of the. Correct. And it does help the US. It does. It was designed. Because the US suppliers will supply the yarn. Where the problem has come in and where there's been a bit of a rub is that the yarn supply, the yarn industry in the United States has gotten smaller despite that. And the regional suppliers of finished garments to the US also has struggled compared to places like Vietnam, Cambodia, and so on because they're not, again, on the basic manifest, they're just not as competitive price-wise. So they've had a hard time competing on that. However, there's signs of change and there are new ways of approaching the business that, again, will require capital investment on the part of, in that part of the world, some of the companies are decent size but many of them are smaller family-owned operations. It's hard to basically come into a mill and a spinning mill somewhere and say, well, you gotta put in another $20 million. It's just not gonna happen. But it should. There has to be a creative way of embracing a lot of the latest technology to improve the productivity and then in turn lower the cost of operation in the region. But it's gonna take a lot of planning and frankly, some capital resources in order to make the industry that much more resilient and to fully benefit, it's more than just tariffs. At the end of the day, as we've discussed with the supply chain, tariffs are getting eaten by the supply chain right now. So it has to, they're kind of back to square one. If they're gonna succeed in the U.S. market over the long haul, they have to be thinking more broadly in terms of where they get their basic raw materials from. Like many of the companies have done that now. They're in the Caribbean in particular and Mexico. They'll import their raw material. They'll import their yarn, say. And they'll pay a duty once when it comes into, say, Mexico and they'll pay a second duty going into the U.S. because it's not qualified under the USMCA. You can ship it legally, just you're gonna pay a higher tariff. But the landed cost of the raw material is so low, it offsets the tariff. It's kind of crazy. So they have to get really creative about how to handle that. Some of that may be government. A lot of it's industry, in my opinion. And do you ever see that places like Vietnam using the manufactured yarn here? Is there potential for that? Like you mentioned China has built this infrastructure. Is it possible for the U.S. to build this infrastructure? It is possible. Particularly when you look at some of the countries that were a lot of the investments gone. Vietnam is a small country and there's only so much room to put textile. I heard they're all booked, the manufacturers. They're all booked. They're totally booked and they have been for a long time. But you're hitting a bandwidth issue. It's just, there's only so much production you're gonna get out of a certain geographic region. Just the way it is. So larger countries, they may have more room but it takes time to do these investments and I think that's the biggest issue here. There's a conception, I think, that oh, you can just go ahead and just turn a switch and you've got a factory going. It's hard here when you don't have train labor. You may have an advantage on things like electricity. Electricity is comparatively cheap in the U.S. Cheaper here compared to those. Yeah, generally. You've got the advantages of not having to, you're trucking as opposed to flying or going over boats which can be expensive and slow. Here you can actually do it just in time delivery which can be very helpful particularly for brands and retailers. That's a real advantage. But to build the infrastructure up to where it, I don't know if it'll ever get to where it was but in terms of having a very successful industry here, it's definitely possible. It may not be the same scale. It'll be a different industry from what we knew back in the day. More technology oriented. More technology driven. A higher quality product. So they're not gonna be chasing the lowest common denominator. They'll be price competitive but they won't be the cheapest thing on the shelf but there'll be some proposition in it that will encourage the consumer to basically say when they see it in the store shelves, oh, that's worth it. I'll do this. The quality is such it just kind of, so it's that kind of strategy. So do I see it coming back? Yes. Will it be like the old industry? No. And it won't be like in multi-states. It'll be in pockets and it has the potential of being a profitable business particularly with new technology and new investors, new investor mindset. In terms of jobs, a lot of people complain about manufacturing jobs especially in your industry because the labor, some people say 30, nobody wants to do these jobs. What would it look like in terms of jobs what you're seeing the future of this industry in the US? I would say that the future of the industry will be going into a factory where robotics has really excelled and new technology in terms of basic manufacturing is done more by machine, managed by an AI platform, ultimately managed by a small team of engineers. You'll be hiring engineers, mechanical engineers and different types of engineers, not necessarily a seamstress. So it's more of an engineering. More of an engineering. That's a valuated job. So instead of hiring thousands of people to fill factories, you're talking about tens of people to manage an automated plant. That's the kind of manufacturing I see. And the fact is, it's hard to get traditional industry, they know that's the way to go but the costs are like crazy. They don't have the funding. That's the challenge. So it's hard. So if you bring in new, however you bring in new money, new thinking and everything's done fresh, that's where I'm starting to see some take up. Robert Antoshak, it was great to have you on Market Insider and please come back and update us on the future of this industry. Thank you very much. It's been my pleasure. Tell us what you think about this interview. When you buy clothes, do you pay attention to where they're made or it doesn't matter to you? Make sure to tell us in the comments. And what do you think about the manufacturing coming back potentially to Mexico and countries around the U.S.? Make sure to let us know in the comments. I'm Siamak Ghorami, this is Market Insider. We'll see you next time.